India to lead campaign against EU’s carbon levy

India to lead campaign against EU’s carbon levy

New Delhi: India will lead a global campaign against the European Union (EU) decision to impose a carbon emissions levy on airlines from 1 January, 2012, unconvinced by arguments that the country’s carriers are not necessarily going to be the ones that will have to pay the most.

The country has taken the initiative to host a meeting of representatives, including the US, from more than a dozen nations in Delhi at the end of the month that will issue a joint declaration against the proposal, according to government officials and diplomatic communications.

Under the planned Emission Trading Scheme (ETS), airlines using EU airspace will have to pay a fee for carbon emissions that exceed a set cap.

Indian carriers that fly to Europe—Air India, Jet Airways (India) Ltd and Kingfisher Airlines Ltd—may end up having to pay millions of dollars annually, according to analysts, a conclusion that’s firmly rejected by the EU.

“Airlines with more modern and efficient fleets, such as those in India, will be at an advantage compared to airlines with older fleets," the EU said in July. “With a carbon price of some €13 ( 853) per tonne and the majority of emissions rights allocated for free to airlines, the average extra cost to airlines will be less than $6 or 260 per passenger on, say, a London-Delhi roundtrip."

The response of the EU to the latest developments regarding the Delhi meeting wasn’t immediately available.

Several countries have confirmed their participation at the Delhi meeting, according to government officials.

“Many countries including India have already formally objected to the EU-ETS and some civil aviation authorities have made similar declarations," the aviation ministry said in a diplomatic communication known as a note verbale sent to one of the countries that was reviewed by Mint. “However, the EU still intends to start the scheme from 1st January 2012."

The plan will hurt airlines based in India, said Sanat Kaul, a former aviation ministry bureaucrat and India’s former representative to the International Civil Aviation Organization (ICAO).

“I think it will (have) a significant impact on Indian carriers—they have made some calculations and it’s quite a bit," Kaul said, adding that the EU may face a backlash.

Global opinion against the EU levy has crystallized, said Vikram Krishnan, analyst with US-based consulting firm Oliver Wyman.

“This really has got the world energized, and the airline industry is working on a collective response," he said.

A joint declaration condemning the EU step will be signed by the attending countries, the Indian aviation ministry note said.

In the note that was issued in response to a previous story in Mint, the EU rejected the contention that the inclusion of aviation in the EU-ETS amounts to a tax.

The move is also consistent with action it has taken in other sectors, said the note that had been issued on behalf of Connie Hedegaard, EU’s commissioner for climate action.

“The EU-ETS is a cap-and-trade system designed to keep emissions covered by the system within a predetermined limit," the EU note said. “It is an emissions ceiling, and is one part of the EU’s comprehensive approach towards reducing aviation’s climate-change impacts. If an airline can manage to cut its emissions to the expected level, it doesn’t need to incur any costs at all."

The EU also said that if India or any other country puts in place rules that have a similar environmental impact, “then all incoming flights from that country should be exempt from the EU system".

The plan to hold the meeting against the EU-ETS in Delhi was taken after consultations involving the ministry of external affairs, the ministry of environment and forests and the Prime Minister’s Office.

“The US wanted a platform, we were more than enthused to be one," said a government official. “This will be the joint Delhi Declaration against the EU-ETS to put pressure on them."

The US has confirmed its participation and is sending a large contingent to the two-day conference starting 28 September, according to one of the government official. South Africa, Saudi Arabia, Qatar, the Philippines and Paraguay are among others that have also confirmed their participation, according to two government officials who did want to be identified.

“Keeping in view the commencement of the scheme from 2012, government of India proposes to hold an international meeting of non-EU member states of ICAO in New Delhi to work towards finalizing a joint declaration as also a working paper for ICAO and other fora," the aviation ministry note said.

The EU said it’s open to talks on the issue and urged that India “think long and hard before siding with those particular interest groups that are opposing this reasonable, necessary and fair measure".

The US has opposed the EU’s proposal saying it “directly infringes on the sovereignty of the United States" since “the EU also intends to impose these taxes on the citizens and businesses of non-European countries worldwide", according to a 20 July statement of the US Congress committee on transportation and infrastructure.

The levy has been proposed by the EU to lower emissions from the aviation sector, which accounts for about 10% of UK greenhouse gas emissions in 2005. It’s expected to increase to 15% by 2020 and 29% by 2050.

“This system rewards airlines that reduce emissions at the expense of those that do not and so provides an economic incentive to reduce emissions," the EU note said.

India has told the EU that the ETS violates the existing bilateral agreements, Mint reported on 27 July.

“We will open the bilaterals and start talks on them. Once we open them there will be many issues that we also raise with them. Let’s see what they have to say then," said a second official. Air services agreements are signed between two countries, detailing how their airlines will operate in each other’s skies.